House passes reform bill, with higher tax rate for ‘super-rich’

Mara Cepeda
House passes reform bill, with higher tax rate for ‘super-rich’
While HB 5636 will lower personal income tax rate to 25%, VAT exemptions will be lifted on several sectors

MANILA, Philippines – The House approved on 3rd and final reading the bill containing the first batch of tax reforms being proposed by the administration of President Rodrigo Duterte.

A total of 246 lawmakers voted yes to House Bill (HB) Number 5636 on Wednesday, May 31, while only 9 voted no and one abstained.

The measure was put to a 3rd reading minutes after it was approved on 2nd reading. This was possible because Duterte had certified HB 5636 as urgent two days ago, which meant the House no longer needed to observe the “3-day rule” between the 2nd and 3rd readings. 

Under HB 5636, the maximum rate of personal income tax will be reduced over time from the current 32% to 25%, except for high income earners. (READ: Duterte’s tax reform: More take-home pay, higher fuel and auto taxes

Those earning P250,000 or below annually will be exempted from paying income taxes. The “ultra-rich,” who comprise 0.1% of taxpayers, will be levied a higher rate of 35% from the current 32%. 

The bill was amended so that the 13th month pay up to P100,000 – up from the current P82,000 – will be tax-free. Other bonuses are tax-free as well.

The measure, however, also proposes higher excise taxes on refined petroleum products and automobiles, except for buses, trucks, cargo vans, jeeps, jeepney substitutes, and special purpose vehicles. 

An additional P10 tax per liter of volume capacity on sugar-sweetened beverages and carbonated drinks will also be imposed.

The value-added tax exemption on cooperatives will remain, but HB 5636 will lift the exemption on the following sectors:

  • exemptions found in special laws, except those covering senior citizens and people with disability
  • low-cost and socialized housing, but conditioned upon the establishment of a housing voucher system
  • power transmission
  • lease of residential units
  • domestic shipping importation
  • boy scouts and girl scouts

Winnings from the Philippine Charity Sweepstakes Office lotto will be subjected to a 20% final tax as well.

With HB 5636 approved on 3rd reading, the measure will now be transmitted to the Senate, where it will go through another 3 readings before it can be transmitted to the Office of the President. The Senators, however, said earlier on Wednesday they would not pass the Palace’s version of the tax reform package. – Rappler.com

Mara Cepeda

Mara Cepeda specializes in stories about politics and local governance. She covers the Office of the Vice President, the Senate, and the Philippine opposition. She is a 2021 fellow of the Asia Journalism Fellowship and the Reham al-Farra Memorial Journalism Fellowship of the UN. Got tips? Email her at mara.cepeda@rappler.com or tweet @maracepeda.